Sunday, February 25, 2007

Keepin' Ya Safe

In 1994, United Defense Industries (UDI) signed a contract with the Defense Department potentially worth $1.1 billion to develop a new howitzer weapon system called the Crusader. Sort of a big tank toting a Howitzer to deliver 100 pound projectiles with a new and improve tube length and cooling system, more automated and quicker.

In 1997 UDI was purchased by the Carlyle Group, a Washington, D.C., investment partnership formed in 1987 by David Rubenstein, a former aide to President Jimmy Carter; Daniel A. D'Aniello, and William Conway, billionaires all. Carlyle's portfolio includes other industries but purchasing defense companies added much to the company's success. Apparently, after the end of the Cold War there were lots of investor neglected defense companies. How sad. Who wants to invest in weapon systems unless we have a big war on.

A February 2001 UDI press release assures us the "Crusader is currently in the Program Definition/Risk Reduction (PD/RR) phase of development that will culminate in a Milestone II decision in April 2003. However, Crusader achieved a number of development goals that go beyond those required of the next milestone. This demonstration shows that Crusader is on the path to begin delivering operationally suitable prototypes beginning in FY 2004."

Doublespeak to say that after 7 years the company still hasn't delivered an operational prototype, in the definition phase of development, send more money please.

In the summer of 2001 UDI, after a leveraged recapitalization, goes public, the initial public offering was completed in December 2001.

May 9, 2002 Donald H. Rumsfeld announced he intends to cancel the Army's $11 billion Crusader artillery program so that money could be invested in more futuristic weapons technologies, setting himself on a collision course with Congress over the mobile, rapid-fire howitzer." (Is that why Rummy was dumped, over a tank?)

On May 29, 2002 the President canceled the Army’s Crusader Artillery program. "In development since 1994, the Crusader weighed 60 tons and would be too heavy for the Army to transport in a timely manner. Moreover, the Crusader was designed to fight a heavy land battle, more likely during the Cold War than the 21st Century. Rather than continuing a system with questionable future relevance, the President reallocated the Crusader’s funds to more advanced technologies including precision guided, artillery weapons. The President’s Crusader decision, endorsed by the Congress, represents a real step towards transformation."

Only futuristic need apply.

Some defense analysts felt that even though the Crusader did not fit into plans for transforming the military, it placated Pentagon officials who were resistant to change. Even if the project is canceled (which it was) UDI has already received $2 billion from the program and would receive more to shut it down.

In April 2004 Carlyle completely exited its UDI investment. In June 2005 BAE Systems, completed its acquisition of United Defense Industries Inc (United Defense). The Company announced it had entered into a definitive merger agreement to acquire United Defense on 7 March 2005 in a transaction valued at $4.192 billion.

Still tops in defense Carlyle advises real opportunity is not in the private sector, but in the U.S. government market, where federal agencies are spending hundreds of billions on new technologies for homeland defense and high-tech warfare.

So here we are, more cliques than you can shake a stick at. Ten years and a couple billion spent, and the Crusader was nothing more than a few test rounds on a Yuma desert, bling for generals who were Cold War relics. It's that military-industrial complex. The gravy train protection racket, sending congress (errand boys) to fetch the funds. Hundreds of billions in real opportunity.


Shutter said...

cf Osprey due for deployment in Iraq real soon now

Hot tip, Boeing to take over BAE (which is now effectively a US company now it has got rid of Airbus).

NB Pat Shanahan, VP Boeing Missile Defense Systems,is in London all next week, accompanied by Lt. General Henry “Trey” Obering III, Director, US Missile Defense Agency meetin'n'greetin' with BAE / MOD

Kate-A said...

I heard Boeing wanted nothing to do with BAE shipyards and the merge off, but if the boys be meeting and eating .... Also heard BAE / Lockheed merge possible.

Bet the Queen's portfolio has all 3.

RoseCovered Glasses said...



General Dynamics gets $80M Award fee for delivery. The Military Industrial Complex does it again.

Please see following article in The Washington Post:

It is time to view once again the vintage movie, "Pentagon Wars". You can still order it for about $8.00 from many video supply sources on the web. It is a humorous but remarkably true story of the design and development of one of the costliest weapons systems ever to grace the Pentagon Budget, the "Bradley Fighting Vehicle". The movie was produced by HBO and starred Kelsey Grammer as the Pentagon General who led the government establishment sponsoring the vehicle program. The profusion of design and performance specification changes and other difficulties which plagued the program for years were hilariously but accurately portrayed in the film.

The new "Marine Expeditionary Fighting Vehicle" is sure to rival the Bradley if it goes to production. According to the Post Article above, the Marines may choose a wiser course and scrap the prototype, starting over with 7 new prototypes over 2 more years, costing $22M each.

Now that's a bargain!

We have bought into the Military Industrial Complex (MIC).

Through a combination of public apathy and threats by the MIC we have let the SYSTEM get too large. It is now a SYSTEMIC problem and the SYSTEM is out of control.

I am a 2 tour Vietnam Veteran who recently retired after 36 years of working in the Defense Industrial Complex on many of the weapons systems being used by our forces as we speak.

There is no conspiracy. The SYSTEM has gotten so big that those who make it up and run it day to day in industry and government simply are perpetuating their existance.

The politicians rely on them for details and recommendations because they cannot possibly grasp the nuances of the environment and the BIG SYSTEM.

So, the system has to go bust and then be re-scaled, fixed and re-designed to run efficiently and prudently, just like any other big machine that runs poorly or becomes obsolete or dangerous.

This situation will right itself through trauma. I see a government ENRON on the horizon, with an associated house cleaning.

The next president will come and go along with his appointees and politicos. The event to watch is the collapse of the MIC.

For more details see:

Kate-A said...

Rose covered glasses -
Thanks for the post. Let's hope not too many of us grunts are underneath if and when the MIC collapses.

I tend to think greed and self-serving'ism is often mistaken for "conspiracy" in America. But you're absolutely right the MIC is a creaking machine groaning beneath its own weight.

I'm adding your link to my list here if you don't mind.

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